The GOOD:

Santa’s long gone, but not before delivering a much-needed stock rally to Wall Street. Such a generous gift has historically signaled better days ahead.

After a lousy 2008, when stocks suffered their worst drop since 1937, investors are closely monitoring three seasonal market patterns that in the past have provided clues on how stocks will fare for the rest of the year. Despite Monday’s small drop, stocks have played along, rising in what tends to be a bullish period.

The so-called Santa Claus rally — or positive returns in the final five days of the year and the first two days of January — is the first of three early-year tests. And the Standard & Poor’s 500-stock index passed with high grades, rising five of the seven days and gaining 7.4%, far above the average 1.4% gain in this pivotal period dating back to 1969, according to the Stock Trader’s Almanac.

The BAD:

The U.S. economy is likely to deteriorate further this year and unemployment will rise into 2010, according to the latest forecasts from the staff of the Federal Reserve.

This bleak forecast was presented to Fed policymakers when they met last month and lowered interest rates to near zero. Low interest rates are one key tool the central bank uses to try to spur economic activity.

According to the minutes from that meeting, the central bank is now predicting that gross domestic product, the broadest measure of economic activity, will fall in 2009.

The Fed cited a multitude of problems dragging down the economy besides rising unemployment, including stock market declines, low consumer confidence, weakened household balance sheets and tight credit conditions. It said business spending is also likely to fall due to weak retail sales and the credit crunch.

In addition, some members of the Fed expressed concerns that the economy could worsen even more than currently expected.

The minutes also showed that some Fed members are now more worried about the threat posed by deflation, or falling prices, than they are about inflation. Deflation can slow economic activity dramatically since it could lead to businesses to cut their production plans in the wake of lower prices.

You pick the one you would like to believe–Or just stick your head in the sand and hope all will go away–it is your choice–have fun!